Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke faced mounting criticism on Capitol Hill as they tried to explain their newly hatched bailout plan to a skeptical Senate Banking Committee.

The $700 billion plan gives unprecedented powers to the Treasury Secretary to buy distressed assets from financial institutions, mainly mortgages and mortgage-backed securities, but Paulson also left open the possibility that he might buy distressed student loans, credit card debt and other types of securities. Despite the plan's vague and ill-defined form, Bernanke and Paulson also insisted on not cluttering up the bill to address lawmakers' many concerns.

At the end of the day, lawmakers seemed to be making some progress in convincing the Treasury to accept some form of oversight of the bailout package and in allowing some relief for homeowners facing foreclosure. However, it is not yet clear if bankruptcy court judges will be allowed to modify the terms of mortgages for primary residences, a key sticking point, or if the package will include limitations on executive compensation at banks that take advantage of the Fed bailout.

The valuation method of the assets also seems to be in question, with Bernanke defending fair value accounting, but also saying the assets should be valued at a "hold-to-maturity" price, which would make them more expensive for the Treasury to buy than the current "fire sale" prices that some of the assets have been reluctantly attracting. The extra tab could end up costing the taxpayer untold billions, without any guarantee that the Treasury will be able to sell back the assets for anything approaching that "hold-to-maturity" price.

Worst of all, the timing seems rushed to many observers, with Paulson and Bernanke insisting the package be passed before lawmakers recess to prepare for the November elections. However, this is one huge package where the devil will be in the details, and working out those details in one week's time in the waning days of an administration is going to require a lot more faith than many people are willing to give the federal government right now.

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